mpanies affected by the
price war are available, economic analysts yesterday warned that the
beleaguered Zimbabwean economy would ultimately pay dearly for the ongoing
government action.
University of Zimbabwe business lecturer Tony Hawkins said the decision
to roll back prices to June 18 levels was unsustainable and could backfire
on the government.
“The government is going to have to climb down on the issue and put in
place subsidies to support industry,” Hawkins said. Among the main candidates
for subsidies will be the beef and fuel industries, Hawkins said.
The Harare authorities have in the past week restored the monopoly of
the state-controlled Cold Storage Company (CSC) that now has the sole
responsibility to buy cattle from farmers.
But the cash-strapped government would have to pump out money to entice
farmers to sell their cattle to the CSC that offers less than what
private abattoirs used to pay.
Beef has disappeared from the formal market since the government
withdrew permits from private abattoirs last week.
The same fate has met the fuel industry following a directive to slash
petrol and diesel prices by up to 60 percent two weeks ago.
The state fuel procurement agency, National Oil Company of Zimbabwe
(NOCZIM), has failed to meet demand while private fuel importers have
gone underground where a litre of petrol costs up to $500 000 compared to
the gazetted $55 000 a litre.
The perennially loss-making NOCZIM has had a chequered history in the
past eight years, characterised by an over-dependence on government
subsidies and inability to supply adequate fuel to meet the country’s industrial and
household needs.
The analysts warned that the current price war could worsen an already
complicated situation for Reserve Bank of Zimbabwe (RBZ) governor
Gideon Gono who is expected to come up with a much-awaited monetary policy
statement at the end of the month.
Gono, who has previously declared war on inflation, is said to have
clashed with his government colleagues over the manner in which the price
freeze was being handled. The RBZ chief however told state media at the weekend
that he was in principle fully behind the price crackdown.
Any future subsidies exert greater pressure on inflation, officially
estimated at more than 4 500 percent although independent analysts put
it at more than 8 000 percent.
The analysts also warned that subsidies would nudge the country’s
already huge budget deficit set at 17.6 percent of gross domestic product in
the 2007 national budget.
The analysts commented as it emerged that Zimbabwe’s besieged
manufacturing sector was now switching to auto-pilot mode on Fridays as company
executives go into hiding to escape arrest and avoid languishing in police cells
during weekends.
More than 2 700 company executives and managers have been arrested in a
crackdown that followed a government directive for manufacturers and
retailers to roll back prices.
Sources in the manufacturing sector yesterday said most senior
executives in the sector no longer reported for duty on Fridays and leave the levers
in the hands of junior or middle management staff.
“The trend has been that since the war on prices started most senior
managers in industry never report for work and make sure no one knows
where they will be in order to minimise the risk of spending the weekend in
police custody,” said a senior executive with a leading manufacturer of
consumer goods, who cannot be named for fear of victimisation.
The executive said there was a feeling in industry that the arrests are
usually timed for Fridays as a way of embarrassing the captains of
industry who would be forced to spend the weekend in police cells.
The arrest fears compound an already difficult situation for Zimbabwe’s
industry, which is being forced to continue producing under
sub-economic conditions.
The sources said most producers were contemplating or had already
downsized their operations since the government onslaught on prices began three
weeks ago.
Meanwhile, official media reported on Sunday that President Robert
Mugabe’s government was planning a new law to extend the price freeze
indefinitely.
Industry and International Trade Minister Obert Mpofu had initially
indicated that the price freeze would last until the first week of
August but the state-controlled Sunday Mail newspaper reported that the
government had finalised a statute to be published this week to extend the freeze
indefinitely.
The lower prices bonanza has been a welcome relief to a majority of
long suffering consumers used to daily increases, but it has brought new
problems with basic goods, such as soap, sugar and cooking oil, no longer
available except only on the illegal black market where prices are extortionate.
Analysts say the government’s latest effort to keep a lid on prices was
meant to pacify angry workers ahead of next year’s elections but would
come at a heavy cost as this could force companies to shut down and could
bring Zimbabwe’s severely weakened economy to a complete halt. – ZimOnline
Post published in: News